Allowed

Mona Jain and Others v. Can Fin Homes Ltd.

DRT24 Jan 2024SA/213/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed a Securitisation Application filed by borrowers against a housing finance company. The court held that despite the debt amount being below the statutory threshold, the respondent qualified as a Non-Banking Financial Company (NBFC) under prevailing master circulars, rendering the proceedings valid.

What did the court decide?

Securitisation Application was allowed with costs.

Mona Jain and Others versus Can Fin Homes Ltd. — Banking and Recovery | DRT (2024)

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DEBTS RECOVERY TRIBUNAL-2, CHANDIGARH, PRESIDED OVER BY M.M. DHONCHAK

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SECURITISATION APPLICATION NO.213/2023 DATE OF INSTITUTION: 22.09.2023 DATE OF DECISION: 24^th DAY OF JANUARY, 2024

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Smt. Mona Jain w/o Sh. Mukesh Jain, aged about 43 years

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Sh. Mukesh Jain s/o Sh. Sh. Sohan Lal, aged about 48 years Both the applicants are residents of House No.134-B, MohallaKalan, Near Durga Mandir, Sonipat, Haryana-131001

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……Applicants

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Versus

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CAN FIN Homes Limited, through its Authorised Officer, NCR Sonipat Branch, SCO No.3, First Floor, Mini Market, Sector-14, Sonipat131001

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....Respondent

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Argued by: Sh. Sunil Kumar Dahiya along with Sh. Amit Singh Panghal Advocate for the applicants (SA) Smt. Indu Kaul Advocate for the respondent FI (through VC)

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FINAL ORDER

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This Securitisation Application has been filed under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the Act' for brevity).

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In brief, this SA has been primarily directed against the respondent in respect of the loan taken in November 2019 for a sum of Rs. 15 lakh for which 50 sq. yards house bearing No. 134B, Mohalla Kalan near Durga Mandir, Sonipat, Haryana-131001, was mortgaged; that the applicants received notice dated 18.04.2023 for taking physical possession of the mortgaged property for not paying Rs. 15,06,159/- as per demand notice under Section 13(2) of the Act; that the applicants were never served with notice under Section 13(2) of the Act; that letter dated 04.09.2023 was issued by Tehsildar, Sonipat, for taking physical possession on 22.09.2023; that the respondent FI was a Housing Finance Company and

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SA/213/2023 MONA JAIN AND ANOTEHR VS CAN FIN HOMES LIMITED 2

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as per Notification of Ministry of Finance (Department of Financial Services) dated 24.02.2020, Non-Banking Financial Company had been defined in Clause-F of Section 45(1) of Reserve Bank of India Act, 1934, having enforcement of security interest in secured debts of Rs. 50 lakh and above as a Financial Institution for the purposes of the Act; that by Notification dated 20.02.2020, the amount of Rs. 50 lakh was reduced to Rs. 20 lakh and above; that the amount involved in the present case being Rs. 15,06,159/-, being less than Rs. 20 lakh, the proceedings under the Act were in violation of Notification dated 12.02.2021 and notice under Section 13(4) of the Act was not served upon the applicants.

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Reply to the SA was filed wherein inter alia it was contended that the respondent Company was a Housing Finance Company registered under Sub-Section 5 of Section 29A of the National Housing Bank Act, 1987; that the respondent was regulated by the National Housing Bank; that the NBFCs which were listed before Reserve Bank of India as on 31.05.2023, did not include the respondent as NBFC as per Notification dated 12.02.2021 and Notifications dated 24.02.2020 and 12.02.2021 did not apply to the respondent. Rest of the averments of the SA were also denied in reply to the SA.

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Replication to reply to the SA and rejoinder to the same were filed.

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I have heard learned counsel for the parties and also gone through the record carefully.

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It was argued by the learned counsel for the applicants that the respondent FI was a Housing Finance Company as per Notification of Ministry of Finance (Department of Financial Services) dated 24.02.2020. It was further argued that Non-Banking Finance Company had been defined in Clause-F of Section 45(1) of the Reserve Bank of India Act, 1934, having enforcement of security interest in secured debts of Rs. 50 lakh and above as a Financial Institution for the purpose of the Act. It was further argued that by Notification dated 12.02.2021 of the Ministry of Finance (Department of Financial Services) the said amount of Rs. 50 lakh mentioned in Notification dated 20.02.2020 was reduced to Rs. 20 lakh and above. It was further argued that as per Reserve Bank of India Circular definition of HFC was mentioned in Reserve Bank of India, Master Circular No.4.1.17 and as per the same, Housing Finance Company was a NBFC whose financial assets in the business of providing finance for housing constituted at least 60% of its total assets. It was further argued

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SA/213/2023 MONA JAIN AND ANOTEHR VS CAN FIN HOMES LIMITED 3

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that the amount in the case was Rs. 15,06,159/- which being less than Rs. 20 lakh, the proceedings under the Act were in violation of Notification dated 12.02.2021.

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It was argued by the learned counsel for the respondent FI that Notifications dated 24.02.2020 and 12.02.2021 did not apply to the present case as respondent FI was under the framework of Housing Finance Companies and not under the purview of NBFC. It was further argued that NBFCs listed before Reserve Bank of India as on 31.05.2023 did not include the respondent FI as a Non-Banking Financial Institution.

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It was argued by Sh. Sunil Kumar Dahiya Advocate that NBFC was an umbrella term which covered within its ambit Finance Companies of various hues. It was further argued by Sh. Sunil Kumar Dahiya Advocate that merely because it was a Housing Finance Company, it was not divested of its character as NBFC.

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Counsel for the applicants drew attention of this Tribunal towards Annexure-A1 of the replication in which in response to question No. 1, it has been mentioned that a Non-Banking Institution which is a Company and has principal business of receiving deposits under any scheme and arrangement in one lump sum or in instalments by way of contribution or in any other manner, is also a Non-Banking Financial Company. He further drew attention of this Tribunal towards Annexure-A of the replication at its page No. 19, wherein under Overview of Regulators of Non-Banking Companies, the Companies registered under Section 3 of the Companies Act, 1956, have been mentioned as NBFCs and under NBFCs regulated by other regulators, Housing Finance Institutions have been mentioned. It has also been mentioned that NBFC is a Financial Institution that is into lending or investment or collecting monies under any Scheme or arrangement. It has also been mentioned that a Company carries on the business of accepting deposits as its principal business is also a NBFC.

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Counsel for the applicants further drew the attention of this Tribunal towards Reserve Bank of India FAQ’s question No. 9, wherein it has been provided that Housing Finance Companies are regulated by National Housing Bank. It has also been provided that Reserve Bank of India does not regulate all Finance Companies and Housing Finance Companies are NBFCs.

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It was argued by the learned counsel for the respondent FI that as per RTI information received from National Housing Bank, Notification

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SA/213/2023 MONA JAIN AND ANOTEHR VS CAN FIN HOMES LIMITED 4

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dated 17.06.2021 superseded all the previous Notifications regarding Housing Finance Companies as a Financial Institution under Section 2(1) (m)(iv) of the Act for the purposes of enforcement of security interest in secured debts. What information has been supplied by the National Housing Bank, that is of no consequence. Moreover, this is beyond the scope of the reply to the SA. Furthermore, the applicants are not running away from Notification dated 17.06.2021.

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In the considered opinion of this Tribunal, Notification dated 17.06.2021 has nothing more than what has been mentioned in Notification dated 18.12.2015 vide which the respondent has been mentioned only a Financial Institution. As per Circular No. 4.1.17 of the Master Circular, Non-Banking Financial Company and Housing Finance Company (Reserve Bank of India) Directions 2021, it has been provided that the Housing Finance Company should be the NBFC. In view of the above Master Circular of the Reserve Bank of India, the Housing Finance Company alike the respondent cannot come out of the purview of NBFC. Learned counsel for the respondent argued that as per Notification dated 18.12.2015, the respondent was one of the Institutions which had been treated as a Financial Institution for the purposes of the Act. In the opinion of this Tribunal, the above Notification does not dilute the Notifications relied upon by the learned counsel for the applicants because the said Notification does not render a fatal blow to the respondent but only a limited blow with regard to applicability of the Act. Moreover, it does not say that it is not a NBFC and it comes out of the ambit of Master Circular in question.

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In view of the above discussion, the respondent is a NBFC and thus, the SA involving a sum of less than Rs.20 lakh succeeds and same is allowed with costs.

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Pronounced in the open Tribunal

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(M.M. Dhonchak) Presiding Officer, DRT-2, Chandigarh

Mona Jain and Others v. Can Fin Homes Ltd.

Case brief

What is this about?

What did the court decide?

Mona Jain and Others v. Can Fin Homes Ltd.

Case brief

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